) recently announced that it would increase its efforts to
protect user privacy by encrypting information flowing between
its data centers within the first quarter of 2014. Users will
have the option to apply the same to all data flow between
themselves and Yahoo!'s services.
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This announcement came close on the heels of recent reports about
NSA and other government agencies tapping communication lines of
the data centers operated by Yahoo and
The increased use of encryption technology is aimed at combatting
government surveillance that may be occurring without the
knowledge of the companies. Even when it's encrypted, online data
can still be accessed, but without the decoding keys the
information is unintelligible.
Reportedly, Google started encrypting soon after recent
revelations about the NSA's data gathering created massive
outburst, criticism and concern regarding privacy of users.
The adverse publicity doesn't seem to have hurt user activity on
Yahoo. The company's search business continues to show signs of
improvement, even in the face of tough competition from
), Google and
). Currently, Yahoo has a huge task at hand, which is to retain
and add to its user base and make them spend more time on its
properties. This would play an important role in bringing back
advertisers as well.
However, inability to protect user information could damage its
reputation and affect its credibility, thus slowing down its
financial growth and undercutting its stock prices in the
Though monetization on Yahoo properties needs to improve, Marissa
Mayer is clearly steering Yahoo in a new direction. This, along
with the Alibaba IPO news has boosted share prices. In the last
six months, Yahoo shares have appreciated 40.3%.
Yahoo reported GAAP revenues of $1.14 billion in the third
quarter, flat sequentially but down 5.2% year over year. Traffic
acquisition cost (TAC) was down 9.1% sequentially and 48.2% from
last year. Excluding these costs in all periods, net revenue was
essentially flat (up 0.9% sequentially and down 0.8% year over
Currently, Yahoo has a Zacks Rank # 3 (Hold).